Gentrack Group Limited (NZX/ASX: GTK), a leading provider of software solutions for utilities and airports, today released its results for the half-year to 31 March 2020.
- Revenue: $50.6m – down 7% on H1 FY19
- Committed Recurring Revenue: $29.7m – up 11% on H1 FY19
- EBITDA (1): $4.3m – down 78% on H1 FY19 on comparable pre IFRS16 basis
- Statutory NPAT: ($12.8m)
- Adjusted NPAT (2): ($1.0m)
- Net cash: $6.4m up $1.8m
- No Interim Dividend payable
The results for the half-year show a decline in revenue of 7% to $50.6m. This reflects the loss of a number of UK customers due to supplier failure or acquisition, and a drop in non-recurring revenue in the UK and Australia. Committed Recurring Revenue of $29.7m continued to increase half on half, up 11% on the prior year, reflecting a net growth in meter points and the shift to a SaaS revenue model.
Underlying EBITDA of $4.3m ($2.8m pre IFRS16 adjustment) was in line with guidance in February. In addition to the revenue reduction, profitability was eroded by an increase in costs of $6.2m over the prior year, principally people costs in the UK. This was addressed with a headcount reduction in February/March, which will benefit the second half.
The statutory NPAT loss of $12.8m for the half is a result of the decision to impair $10.7m of goodwill and intangible assets in Blip and $1.5m of previously capitalised utility software following rationalisation of our product range in the UK. Blip, which was acquired in April 2017, has been significantly impacted by the COVID-19 global airport shut down, with the timing of a recovery remaining uncertain. This has impacted the forecast revenues from new projects in H2. Blip has now been fully integrated into the Veovo business and we continue to see significant opportunities in passenger tracking and prediction at airports and railway stations.
Notwithstanding the reported loss, the Group achieved $8.6m operating cashflow for the period adjusted for IFRS16, finishing with $6.4m Net Cash at 31 March 2020. In light of the NPAT loss, the Board has decided not to pay an Interim dividend and will review the position at the year end.
Both utilities and airports revenues were down on the prior year period, however we started new energy and water billing and assurance projects in the UK, and Veovo projects at Luton Airport and Swedavia, Sweden’s Aviation Authority.
The COVID-19 pandemic had no material impact on the Group’s operations for the first half and business continuity plans and working from home have enabled Gentrack to continue to operate largely unaffected. However, the economic downturn has now had an impact on our Airport and Utility customers, and we are seeing some projects delayed and postponed in the second half. In the UK, Energy Retailers were already under financial pressure prior to the economic downturn as a result of Government price caps introduced in 2019, and there is ongoing risk of further failures and consolidation in the second half.
Notwithstanding the impact of the economic downturn Gentrack expects to deliver a second half EBITDA result ahead of the first half, and to remain cash flow positive.
Longer term with SaaS products that deliver costs savings and improved operations and efficiency to utilities and airports on mission critical systems, Gentrack is well positioned to emerge from the current difficult market conditions and return to consistent profit growth.
All figures are presented in NZ$.
(1) EBITDA: Earnings before depreciation, amortisation, impairments and non-operating expenses related to acquisitions.
(2) Adjusted NPAT – Underlying NPAT adjusted for the impairment of Goodwill and intangible assets